The Walt Disney Company and Pixar Inc.: To Acquire or Not To Acquire?

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MGMT 102 STRATEGY

   Case discussion notes

The Walt Disney Company and Pixar Inc.:  To Acquire or Not to Acquire?

Questions:

1. Evaluate whether there is value (or not) of:

– Pixar and Disney working together

– Pixar and Disney working separately

– Pixar working with companies other than Disney

2. How feasible is it for Disney to renegotiate the contract and why?

 Greta Fontana

     G1776899

Evaluate whether there is value (or not) for:

Pixar and Disney working together/separately 

Pixar should work with Disney because it can rely on Disney’s distribution channels and be financially sustained.

Disney is driven by hand writing while Pixar has engineers so they kind of have two different ways of thinking and working.

Pixar has its own values that may not be compatible to Disney

Prior to Disney’s acquisition of Pixar, the two companies were separate entities that partnered together for distribution purposes. Here follow the values that each other’s collaboration provided to the two companies:

CAPS:

One positive aspect of the relationship between Pixar and Disney was their reciprocal collaboration on the development of Computer Animated Production Systems (CAPS).

Disney used this software in several successful movies, such as “The Rescuers Down Under” and the award-winning “the Lion king”.

Feature film agreement:

The two studios agreed on a deal to produce three movies; the first one realized was Toy Story which generated more than $350 million in box office and video sales, making it the highest –grossing film realised in the Unites States that year.

Co- production agreement:

In 1997 the companies signed a contract whereby Pixar would produce exclusively for Disney at least five original full-length animated films, sharing the production costs equally.

It’s been estimated that the five-film deal added over $1.5 billion in operating income and $0.44 in EPS to Disney’s bottom line.

Therefore, their collaboration helped pushing away competition, provided an easier access to technology and human capital.

In 2004 the partnership stopped because of Pixar’s desire to renegotiate the terms of the contract.